Ghana’s banking sector recorded a non-performing loan (NPL) ratio of 18.0 percent in April 2026. This figure marks a significant reduction from 23.6 percent in April 2025. Bad loans across the sector were valued at over GHS 21 billion in December 2025.
Professor Patrick Asuming, an economist and senior lecturer at the University of Ghana Business School, highlights the critical link between NPLs and policy rate easing. He states that a high NPL ratio signals elevated risk to banks. This elevated risk then prevents commercial banks from quickly lowering their lending rates, even when the Bank of Ghana (BoG) reduces its benchmark policy rate.
The persistently high NPL ratio remains a key concern for Ghana's economic stability and growth. High NPLs constrain banks' ability to lend, which in turn limits credit availability for businesses. This situation hampers economic expansion and job creation across various sectors of the Ghanaian economy. The banking sector's health is crucial for supporting government initiatives and private sector investment.
Professor Asuming noted, “If NPLs are not coming down sufficiently, you wouldn’t expect banks to be reckless and start giving loans at low rates.” This statement underscores the cautious approach banks adopt in the face of high credit risk. The BoG issued a directive in August 2025 for banks to cut their NPL ratios. Banks must reach below 15 percent by December 31, 2026. They must further reduce it to 10 percent by 2027 or face consequences like forfeiting dividend and bonus payments. Microfinance institutions face an even stricter 5 percent NPL ceiling.
The sustained high NPL ratio has significant implications for Ghana’s financial landscape. It suggests that despite aggressive monetary easing by the BoG—from 28 percent in July 2025 to 14 percent in March 2026—average lending rates still hover around 20 percent. This wide gap between the policy rate and commercial lending rates indicates a disconnect. It impacts businesses' access to affordable credit, ultimately slowing economic recovery and investment. Stakeholders will closely watch banks’ compliance with the BoG’s directives and the resulting impact on lending rates and economic activity.
Professor Asuming attributes the high NPL ratio to several factors. These include high lending rates, borrower dishonesty, and the prevailing macroeconomic environment. He cautioned against demanding drastic NPL reductions without addressing these underlying causes. Such demands, he argued, could lead banks to write off provisioned loans prematurely. This could undermine the natural improvement of the country’s credit market. He instead recommended that the BoG focus on enhancing credit evaluation systems and implementing targeted reforms within banks. This approach aims to organically reduce NPLs. The gradual decline in NPLs seen recently suggests that the banking sector is positively responding to the improving macroeconomic environment. However, some economists fear the tough NPL targets could lead to a credit crunch. Banks might become even more careful about lending to businesses. This could further tighten credit access, particularly for small and medium-sized enterprises (SMEs).
To solve the high NPL problem, Professor Asuming proposes a two-part solution. First, banks must improve their credit screening processes. They should use credit scoring systems to identify risky borrowers. This allows trustworthy businesses to access affordable credit. Second, borrowers must consistently adhere to their repayment plans. This mutual responsibility is vital for fostering a healthier lending environment. The success of these measures will determine the future trajectory of lending rates and credit access in Ghana.